China's JD.com looks to warehousing assets to help revive profits

By Cate Cadell BEIJING (Reuters) - China's second-largest e-commerce firm, JD.com Inc, said it is shifting management of its warehousing assets to a separate unit, in a move it hopes will revive profits after it swung back to a loss in April-June. JD.com, which counts Tencent Holdings Ltd, Walmart Inc and Alphabet Inc's Google as investors, has been in and out of the red for the past year and on Thursday reported a second-quarter net loss of $334.4 million. That was nearly double forecasts for a $177 million loss in a Thomson Reuters I/B/E/S poll of 18 analysts and reflected increased investments and slower sales. In a call with analysts on Thursday, executives said that they expect the new unit, which will oversee warehouse sales and warehouse management services, to help offset hefty technology investments as the company battles Alibaba Group Holding Ltd for market share. JD.com currently owns roughly 2.5 million square meters of warehouse space, part of it acquired in recent years on beneficial terms with local governments that are looking to boost job creation and which will soon start to yield returns. "(These) initiatives are yet to provide meaningful financial results but we believe we've made good traction since doubling down on technology last year," JD.com's Chief Financial Officer Sidney Huang said. "We expect the monetization of our logistic properties, when realized, will compensate part or all of the additional investments," Huang said. Huang said that some, but not all, of the revenue from the new unit would become visible in the company's financials within six to 12 months. JD.com's shares were up nearly 1 percent on New York's Nasdaq on Thursday but are down more than 20 percent since the start of the year. The drop echoes extended slides by Alibaba Group Holding Ltd and JD.com investor Tencent Holdings Ltd, amid analyst concerns over the health of Chinese tech stocks. SOFT SALES JD.com's sales volumes are historically higher in the second quarter due to the company's mid-year shopping festival '618', an 18-day event, but profits took a hit this year when sales dropped unexpectedly toward the end of the festival, executives said. JD.com reported sales of 159 billion yuan during 618, up 33 percent from a year earlier but lower than analysts expected due to crossovers with national holidays. "In the last 10 days of June we started to observe a softness in our sales growth, but we've seen recovery in August," said Huang. Executives have blamed unfair competitive tactics by market leader Alibaba for harming JD.com's clothing sales and creating a "ripple effect" that negatively affects other categories. Alibaba has previously denied its strategies are unfair. JD.com forecast revenue growth for the third quarter of between 25-30 percent, skewing lower than an average estimate of 29.8 percent in a Thomson Reuters I/B/E/S poll. The company reported a 31.2 percent rise in revenue to 122.3 billion yuan for the quarter ended June 30, marginally below an average estimate of 122.7 billion yuan from 22 analysts polled by Thomson Reuters I/B/E/S. (The story corrects paragraph two to show that the net loss number is in dollars, not yuan and in paragraph three to show that net loss estimate is in dollars, not yuan.) (Reporting by Cate Cadell in Beijing and Akanksha Rana in Bengaluru; Editing by Shailesh Kuber/Jan Harvey/Susan Fenton)